AGDC gets help soliciting investors for LNG Project

Goldman Sachs and the state-owned Bank of China have agreed to help the Alaska Gasline Development Corp. solicit equity and debt investors in the $43 billion Alaska LNG Project, it was announced March 27. (Photo/Richard Drew/AP)

The Alaska Gasline Development Corp. has secured two of the world’s largest banks to help raise funds for the $43 billion Alaska LNG Project.

Goldman Sachs and the Bank of China will assist AGDC in raising multiple rounds of debt and equity investment, according to a late announcement March 27 from the state-owned corporation.

Equity offerings will be made to Alaska municipalities, Native corporations and all Alaska residents in addition to more traditional private equity investors, as required by Senate Bill 138, which set up the initial commercial framework for the project in 2014.

“Bank of China and Goldman Sachs are well-positioned to provide AGDC with world-class institutional knowledge and resources required to arrange the equity and debt financing to build Alaska’s natural gas infrastructure and LNG export project,” AGDC President Keith Meyer said in the release.

The first rounds of equity solicitation will be used to provide working capital for AGDC until the corporation has secured sufficient funding and regulatory approvals for full-scale development.

Before AGDC can accept any money from outside investors, however, the Legislature must first give the go-ahead.

Spokeswoman Rosetta Alcantra denied a public records request for the corporation’s contracts with the Bank of China and Goldman Sachs citing the broad authority the Legislature gave AGDC to sign confidentiality agreements and withhold commercial documents that would otherwise be public.

“Both Goldman Sachs and Bank of China will serve as AGDC’s financing arrangers, underwriters and placement agents for Alaska LNG. Bank of China will focus on raising funds from Chinese sources and Goldman Sachs will focus on U.S. and other international investors,” Alcantra wrote.

“The two companies will be paid a reasonable fee for services provided. Additionally, they will receive a success fee upon procuring necessary financing for Alaska LNG.”

The contracts other state-owned corporations enter into are generally public documents and AGDC has selectively released other contracts it has signed to media outlets upon request.

The Journal is appealing the denial of the records request.

Authorizing AGDC’s funding is the Legislature’s primary source of control over the project that the Walker administration is pursuing.

Securing the outside working capital will likely be necessary for AGDC to keep the project moving because additional state funds will be exceedingly difficult to come by, but not just because the state continues to struggle through annual budget deficits in the $2.5 billion range.

Many legislators on both sides of the aisle are also skeptical of AGDC’s ability to pull the massive project together with a staff of less than 40 individuals; there are also questions about the project’s economics, regardless of the entity leading it.

AGDC officials expect the corporation will have about $43 million on-hand by the end of June, which is also the end of the state’s fiscal year, according to documents presented at the March 8 board of directors meeting. The corporation spent nearly $37 million in 2017 and has been operating with funds remaining from prior legislative appropriations when a consortium of BP, ConocoPhillips and ExxonMobil led the Alaska LNG Project until the start of 2017.

The producers estimated the period when the project’s designs are being finalized and materials and equipment are being ordered would cost roughly $2 billion before actual construction commenced, also known as full front-end engineering and design, or FEED.

However, that was also when the project was operating under a different management structure and the overall cost estimate was still between $45 billion and $65 billion.

The state and the three producers spent about $650 million combined in the pre-FEED stage before the state took the lead on the project.

The nationalized Bank of China is one of three large Chinese companies — oil and gas giant Sinopec and the country’s sovereign wealth fund managers China Investment Corp. are the others — to sign a nonbinding framework deal with AGDC last November that in broad terms exchanges 75 percent of the project’s 20 million tons per annum of LNG capacity for financing 75 percent of the $43 billion Alaska LNG price tag.

“Under the witness of both President Xi (of China) and President Trump, Bank of China was one of three China-owned entities to sign a joint development agreement with the State of Alaska and AGDC. We believe it is a very important project for China-U.S. economic ties. Joint development agreement parties are advancing the economic analysis of the project in order to lay (a) more solid foundation for investment and financing,” Bank of China said in a statement issued by AGDC.

Goldman Sachs Managing Director Kevin Willens said simply that he is pleased the bank is working with AGDC and the Bank of China on the project in the AGDC announcement.

Meyer has said he hopes to have firm agreements in place with the Chinese companies by the middle of the year to continue rapidly progressing the project.

AGDC is also pushing to start construction shortly after receiving regulatory approval, the lion’s share of which is tentatively scheduled to happen in March 2020 — when the Federal Energy Regulatory Commission earlier this month said it plans issue a record of decision on the project’s environmental impact statement — presuming a favorable ruling from FERC.

However, the corporation could begin contracting for long-lead items before then, according to Meyer.

The state agency leading Alaska’s gas line megaproject has brought on a pair of well-connected consultants to pitch its message to policymakers in Washington, D.C., and to the Alaska public.

The Alaska Gasline Development Corp., a public entity whose board is chosen by the governor, has hired the Virginia-based firm of Mike Dubke. He worked for three months last year as communications director for President Donald Trump and has also worked as a campaign strategist for both of Alaska’s U.S. senators.

The gas line corporation has also hired Kevin Sweeney, who recently left his job as a top aide to one of those senators, Lisa Murkowski. Sweeney, formerly Murkowski’s state director, is now working as a subcontractor for Dubke’s communications firm, Black Rock Group.

While both Sweeney and Dubke have close ties to Alaska’s congressional delegation, neither is formally lobbying on AGDC’s behalf, Dubke said in a phone interview last week. Instead, they’re effectively advising AGDC on its own lobbying — on how best to communicate with Congress, the White House, federal regulators, Alaska policymakers and the public.

“There’s a big difference between helping them craft their message in a way that Washington would understand — which is what I do — and what a lobbyist would do, which is setting up meetings and pressing for certain pieces of legislation,” Dubke said. “I’m just helping them frame their arguments in a way that people will understand.”

Part of Dubke’s job, he added, is monitoring to make sure that Trump’s administration and Congress don’t adopt policies that could inadvertently damage the project, known as Alaska LNG.

Trump this month ordered steep new taxes on steel and aluminum imports, which Murkowski said could add as much as $500 million to the project’s cost. And Trump’s tough stance against Chinese imports has prompted fears that he could start a trade war — just months after China’s state-owned enterprises announced they’d partnered with Alaska on the pipeline project.

AGDC’s $15,000-a-month contract with Black Rock Group was signed in November and runs through June.

Sweeney’s company, Six-7 Strategies, was hired last month as a subcontractor to Black Rock Group at the same monthly rate, also through June. Sweeney’s wife, Tara Sweeney, has been tapped by Trump for a top job at the U.S. Department of the Interior, though her appointment has been held up by questions about her ownership of shares in an Alaska Native corporation.

An AGDC spokeswoman, Rosetta Alcantra, provided copies of the contracts in response to a records request from ADN. Asked to discuss them, she provided a prepared statement.

“The Alaska LNG project is on an aggressive timeline and we need contractors who are familiar with Alaska, the White House and the Trump administration to assist us in building the project awareness in Washington, D.C.,” she said.